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The Kelkar committee set up to suggest a road map for enhancing oil and gas production has gone beyond its key recommendation of market-linked gas pricing. The panel has pitched for extending contracts for the economic life of blocks, revamping the bid parameters under NELP and allowing the private sector to develop shale reserves in nominated blocks.
The committee proposed the changes in a consultation paper submitted to the petroleum ministry last month. The views of the panel chaired by former Finance Secretary Vijay Kelkar, if adopted, will alter the development of India’s oil and gas sector over the next decade-and-a-half through 2030.
“Extension of the contract tenure up to the end of the economic life of the asset would create incentives for operators to focus on long-term investments such as enhanced oil recovery techniques rather than short-term gains,” the panel said. The suggestion assumes significance as Cairn India, the petroleum arm of Vedanta Resources, is seeking an extension of its contract for the Rajasthan oilfields beyond the current term ending in 2019.
Vedanta Chief Executive Tom Albanese had last week said the limited tenure of production sharing contracts (PSCs) in the petroleum sector with multiple renewals deterred investment and private sector participation by not allowing investors to put in place business plans that maximised output over the economic life of the field. The former Rio Tinto chief had also called for relaxed guidelines on private sector participation for exploitation of non-conventional reserves like shale gas and coal bed methane (CBM).
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The Kelkar panel also noted that shale gas might account for over 75 per cent of India’s untapped hydrocarbons. “India should put in place a policy to allow private players to explore shale from nominated blocks,” the committee said. Current policy allows only oil PSUs to explore shale reserves in onland blocks allotted on nomination.
Another key area of reform favoured by the Kelkar panel is strengthening the technical evaluation under NELP bidding. The committee suggested increasing the weight of the technical criteria to a minimum of 50 per cent for deepwater blocks. “Also, a higher weight should be allotted to bids submitted as a consortium or joint venture with Indian companies to encourage knowledge transfer and domestic capacity building,” the panel said.
The committee was set up in 2013 to “prepare a road map for enhancing domestic production and sustainable reduction in import dependence by 2030”. The consultation paper follows the committee’s first report submitted in January 2014 and invites stakeholder views on various aspects.
According to the panel, producer prices of gas should be market-linked and freed from government intervention to allow creation of a gas market in the country and increase supply. It also called for developing a transnational gas pipeline infrastructure and encouraging trading of spot and future contracts for gas on commodity exchanges.
The Kelkar committee opposed implementing the revenue sharing model favoured by the Rangarajan panel for contracts to be awarded in the next NELP bidding round.
The committee is expected to submit its second report by the end of this month amid consultations by a four-member secretarial panel to evolve new gas pricing guidelines.
